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June 2017 - Communications Between Counsel and PR Firms: Beware of Privilege Waiver

by Howard J. Klein

There are instances in which legal counsel may find it expedient to hire a public relations (PR) firm to assist in the representation of a client. This is often the case, for example, in matters involving clients whose reputation or character may be called into question in the course of legal proceedings. A recent California appellate court decision emphasizes one specific danger of the retention of a PR firm: the waiver of the attorney-client privilege.

In Behunin v. Superior Court, 215 Cal. Rptr. 3d 475 2017 WL 977095 (March 14, 2017), the Second District Court of Appeal ruled that communications between Behunin’s attorney (Steiner) and the PR firm Steiner hired for Behunin’s benefit were not protected by the attorney-client privilege. The case stemmed from a suit filed by Behunin against the noted investment advisor Charles Schwab and his son arising from a real estate dispute. Apparently in the belief that smearing the Schwabs would induce them to settle on terms favorable to his client, Steiner retained the PR firm (Levick) to create a website linking the Schwabs to the infamous former Indonesian dictator Suharto. The plan (predictably) backfired when the Schwabs filed a defamation suit against Behunin and Steiner, who, in turn, filed a special motion to strike the Schwabs’ complaint under California’s anti-SLAPP statute (Cal. Civ. Proc. Code § 425.16 (Deering 2014)). The Schwabs sought limited discovery from Behunin and Steiner under section 425.16(g), including communications among Behunin, Steiner, and Levick regarding the website. Behunin objected to discovery of the Levick communications, asserting that they were covered by the attorney-client privilege. The trial court overruled the objection, and Behunin sought a writ of mandamus from the court of appeal, which accepted the writ and ordered a stay of discovery, pending their resolution of the privilege issue.

The court of appeal referred first to section 954 of the California Evidence Code, which establishes that confidential attorney-client communications are privileged, subject to the condition of section 952 of the California Evidence Code that a “confidential attorney-client communication” be disclosed to no one “other than those who are present to further the interest of the client . . . or those to whom the disclosure is reasonably necessary for the . . . accomplishment of the purpose for which the lawyer is consulted.” Similarly, section 912(d) of the California Evidence Code provides that the attorney-client privilege is not waived by a confidential disclosure to a third party of a communication protected by the attorney-client privilege “when the disclosure is reasonably necessary for the accomplishment of the purpose for which the lawyer . . . was consulted . . . .”

Against this statutory backdrop, the court declared that there is no “public relations” privilege in California. Thus, no privilege would attach to confidential attorney-client communications disclosed to the PR firm (a third party) unless the disclosures were encompassed by the attorney-client privilege. This would require that one of two conditions be met: (1) the PR firm had no interest of its own in the litigation, but was acting as an agent or assistant who was advancing the client’s interests in the litigation; or (2) the PR firm, while an agent of neither the attorney nor the client, had common interests with the client in the litigation, such that disclosures between the client and the PR firm were reasonably necessary to accomplish the purposes for which the attorney was consulted. The court held that the communications with Levick met neither condition. Accordingly, the writ of mandate was denied, the stay of discovery was vacated, and discovery of the communications in question was allowed to proceed.

The court first analyzed whether Levick was someone to whom the disclosures were made for the purpose of advancing Behunin’s interests in the litigation. The court declared that the disclosures to Levick must have been “reasonably necessary to accomplish the purpose for which Behunin retained Steiner.” Behunin, however, provided no evidence showing why communications with Levick were reasonably necessary to assist Steiner in developing a litigation strategy or in inducing the Schwabs to settle. Without such evidence, Behunin could not meet the burden of proving that his and Steiner’s communications with Levick were reasonably necessary for Steiner to provide Behunin with legal advice regarding the underlying lawsuit against the Schwabs, or to represent Behunin in that lawsuit, which was the purpose for which Behunin retained Steiner.

Behunin asserted that because the communications with Levick were for the purpose of driving the Schwabs to settlement through the generation of negative publicity, the communications were therefore reasonably necessary to accomplish the purpose of Steiner’s representation. This contention was dismissed by the court, on the grounds that accepting such reasoning would expand the privilege to encompass almost any strategy, implemented or assisted by any third party (such as a government agency or a competitor), to pressure an opposing party to settle. The court emphasized that the necessary explanation was lacking in terms of how the communications with Levick assisted Steiner in developing a plan for resolving the litigation.

Behunin further contended that his position was supported by a line of federal cases that applied the attorney-client privilege to communications with a PR consultant on the grounds that the consultant was the “functional equivalent” of an employee of a corporate client. The court found nothing in the cited federal authority to support Behunin’s position. For example, Grand Canyon Skywalk Dev., LLC v. Cieslak, 2015 WL 4773585 (D. Nev. 2015), holding that the privilege was not waived by disclosure to a PR firm, applied Nevada law, which recognizes a broader privilege than does California. Egiazaryan v. Zalmayev, 290 F.R.D. 421 (S.D.N.Y. 2013), likewise, was of no help to Behunin. Applying New York law (which is similar to California law on this issue), the court in that case held that the party asserting the privilege for communications with a PR consultant must show both that the disclosure was made with a reasonable expectation of confidentiality, and that the disclosure was necessary for the client to obtain informed legal advice, a showing that Behunin could not make. Likewise, the court distinguished In re Copper Mkt. Antitrust Litig., 200 F.R.D. 213 (S.D.N.Y 2001), which held that communications with a PR firm that regularly conferred with counsel in preparing press releases and other materials incorporating counsel’s legal advice were privileged under New York law on the grounds that the PR firm was the “functional equivalent” of an in-house PR department. The court found that even in the Copper Market case, a detailed factual showing was still required that the PR consultant was responsible for important corporate duties, had a close working relationship with the company’s principals on matters critical to the company’s litigation position, and uniquely possessed information needed in the litigation. Behunin produced no evidence of such a relationship between Levick and Behunin’s company.

Finally, the court held that Behunin did not establish that he and Levick shared a “common interest,” whereby the disclosures between them would have been reasonably necessary to accomplish the purposes for which Steiner was retained. For the disclosure to remain privileged under the “common interest” test, the court observed, the party asserting the privilege and the third party to whom the disclosure was made must have a common interest in securing legal advice regarding the same matter. Further, the disclosure must have been made to advance their common interest in securing legal advice on that particular matter. According to the court, Behunin could show no common interest with Levick in securing legal advice regarding the same matter. Levick did not seek legal advice from Steiner, nor was there any attorney-client relationship between Levick and Steiner. As Behunin himself stated in a declaration, Steiner hired Levick on Behunin’s behalf without knowing anything about the content of the website Levick was to create. Thus, although both Behunin and Levick wanted the PR campaign against the Schwabs to succeed, this common goal established at most an “overlapping” interest that fell short of furthering the attorney-client relationship between Behunin and Steiner. Without a showing, at a minimum, that sharing his confidential attorney-client communications with Levick was reasonably necessary to advance his case against the Schwabs, Behunin could not establish that the common interest doctrine was applicable to retain the attorney-client privilege for those communications.

It is clear from this case that in California, counsel should expect a challenge to the assertion of the attorney-client privilege as to disclosures of confidential attorney-client communications to a PR consultant or firm retained by counsel in connection with the client’s representation. Avoiding a waiver of the privilege will require convincing evidence that the disclosures to the PR firm or consultant were reasonably necessary to advance the client’s interests in the matter for which counsel was retained. Thus, counsel should be prepared to provide documentation that the involvement of the PR firm or consultant meets this criterion.

Howard J. Klein is a Partner at Klein, O’Neil & Singh, LLP and a registered patent attorney. His practice areas include patent and trademark prosecution, licensing, infringement, and validity opinions, and litigation support. He can be reached at HowardJKlein@koslaw.com.

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